Aussie consumer confidence is capped until wage growth improves

Photo by Chris Hondros/Getty Images

Australian consumer confidence slipped by 1.3% last week after a 2.4% gain the week prior, but is still holding around its long-term average.

The weekly ANZ-Roy Morgan consumer confidence data had a reading of 113 last week, against a historical average of 112.9.

“Stepping back from the weekly volatility, it was encouraging to see a recovery in confidence over June,” said David Plank, ANZ’s Head of Australian economics.

“After a sharp fall in May, confidence rose steadily over the past month and appears to have stabilised around its long term average.”

Household’s views towards their current finances continued to show encouraging signs after falling in the wake of the federal budget in May.

Sentiment towards current financial conditions rose by 1.4% after climbing by 3.8% the week before. That wasn’t matched by optimism about future finances, which fell by 0.8% last week.

There’s was more weekly volatility in views about the broader economy. Consumer confidence for current economic conditions fell by a sharp 6.2%, which offset most of the recent gains as it climbed steadily in the previous three weeks.

Views around future economic conditions also dipped, with a 2.5% fall in consumers’ 5-year outlook.

Views towards future economic conditions are now well below their long-term average:

Plank said that gains in confidence around current finances were likely helped by the strength of recent employment reports.

“That being said, we believe the upside in sentiment will likely be capped, given soft wage growth, high levels of household debt and a slowdown in house price growth,” he said.

The “time to buy a household item” index moved higher by 0.8%, and remains above its long-term average. Inflation expecations ticked higher to 4.3%, after tracking consistently at 4.2% in June.

“Overall, the labour market will remain an important influence on confidence over the coming months,” Plank said.

“A gradually strengthening labour market along with still accommodative monetary conditions should broadly support confidence over the year.”

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.